On June 30, the Canadian Securities Administrators (CSA) introduced new disclosure requirements for the exempt market. The Report of Exempt Distribution states that companies and underwriters must report certain exempt distributions to the OSC.
The move hasn’t been welcomed by all, but National Exempt Market Association President Craig Skauge believes it is certainly a step in the right direction, albeit one that requires further work by the regulators. He explains his reasoning to Wealth Professional.
“I think there is such a thing as regulatory overreach and in certain cases they go too far in terms of what they want to gather,” he says. “Overall, we agree with the regulators that we need better data in this marketplace. They won’t get that unless we provide the information.”
Knowledge is power after all, but as Skauge outlined, the increased requirements by the OSC has also led to accusations of an overbearing regulator.
“There has been pushback on a lot of institutional financings because the entities providing capital is resisting giving too much data,” he says. “That’s especially the case with foreign entities. There is a certain amount of privacy that large foreign investors like to have. It’s been questioned if the regulators have went too far with the data requirements.”
As head of NEMA, Skauge represents Canada’s exempt market industry. His position means he is well placed to comment on how this report has been received. In that respect, he believes the OSC still has some work on its hands to bring the regulatory standards up to scratch.
“I would like to see this data made publically available,” he says. “Too much regulatory change is done in a vacuum. If they want to gather data from the public and those raising capital, they should allow the public to access that data themselves. Too often this information is kept in close quarters.”
Another issue he believes is in need of address is the approach regulators take to the exempt market. For him, the industry’s reputation sometimes precedes itself, and is not grounded in reality.
“What I would like to see from the regulators in general is a better understanding of the retail exempt market,” he says. “There needs to be a more fundamental understanding of the real risks of exempt market securities, as opposed to this high-risk label they have placed on anything not sold under a prospectus.”
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